Vancouver, February 28, 2008 (TSX: LUN; OMX: LUMI; NYSE: LMC) Lundin Mining Corporation (“Lundin Mining” or the “Company”) today reported unaudited earnings, before impairment charges and income tax, of US$84.0 million for the fourth quarter of 2007, within the range given in recent guidance.
The Company had been expected to release its final results for the fourth quarter today as previously announced. However impairment assessments in respect of goodwill arising on the merger with EuroZinc and the acquisition of Rio Narcea have not yet been finalized. The Company wished to provide as much financial information as it could at this time and has therefore decided to release full details of results before impairment charges and income tax. These are contained in the attached release.
Sales revenue in the fourth quarter of 2007 was US$253.1 million, an increase of 7.2% over the previous corresponding period. Increased copper and nickel sales arising from the inclusion of the Neves-Corvo mine (acquired in October 2006) and the Aguablanca mine (acquired in July 2007) was partially offset by lower zinc volumes and prices. Sales of copper now represent over fifty percent of the Company’s revenue.
Earnings before impairment charges and income tax for the fourth quarter of 2007 were in-line with the corresponding period in 2006 reflecting increased sales and the offsetting effect of lower zinc prices. Included in the quarter are US$56.9 million of pricing adjustments relating to final pricing of Q3 sales as well as year-end price adjustments based on the forward metal price curve.
During the period, the Aljustrel mine in Portugal achieved first zinc production in accordance with plan.
Commenting on the results, Mr. Phil Wright, President and CEO of Lundin Mining said, “Pricing adjustments affected the fourth quarter results, however, over the full year period, the Company achieved significant growth with earnings, before impairment charges and income tax, up 121% to US$453.6 million”
Commenting on the metal price outlook for 2008, Mr. Wright said, “While we remain optimistic on copper and lead prices going forward, we do expect some weakness in zinc until the effect of the present economic slowdown is known”.
Yesterday the Company filed on SEDAR its restated financial statements and MD&A for the first, second and third quarters of 2007.
The Company advised that it will release the impairment assessment as soon as it is finalized.
About Lundin Mining
Lundin Mining Corporation is a rapidly growing, diversified base metals mining company with operations in Portugal, Spain, Sweden and Ireland. The Company currently has six mines in operation producing copper, nickel, lead and zinc. In addition, Lundin Mining holds a development project pipeline which includes the world class Tenke Fungurume copper/cobalt project in the Democratic Republic of Congo and the Ozernoe zinc project in Russia. The Company holds an extensive exploration portfolio and interests in international mining and exploration ventures.
For further information, please contact:
Anders Haker, Vice President and CFO: +46-708-10 85 59
Catarina Ihre, Manager, Investor Relations: +46-706-07 92 63
Sophia Shane, Investor Relations North America: +1-604-689-7842
Certain of the statements made and information contained herein is “forward-looking information” within the meaning of the Ontario Securities Act or “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 of the United States. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, risks and uncertainties relating to foreign currency fluctuations; risks inherent in mining including environmental hazards, industrial accidents, unusual or unexpected geological formations, ground control problems and flooding; risks associated with the estimation of mineral resources and reserves and the geology, grade and continuity of mineral deposits; the possibility that future exploration, development or mining results will not be consistent with the Company’s expectations; the potential for and effects of labour disputes or other unanticipated difficulties with or shortages of labour or interruptions in production; actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations; uncertain political and economic environments; changes in laws or policies, foreign taxation, delays or the inability to obtain necessary governmental permits; and other risks and uncertainties, including those described under Risk Factors Relating to the Company’s Business in the Company’s Annual Information Form and in each management discussion and analysis. Forward-looking information is in addition based on various assumptions including, without limitation, the expectations and beliefs of management, the assumed long term price of copper, lead and zinc; that the Company can access financing, appropriate equipment and sufficient labour and that the political environment where the Company operates will continue to support the development and operation of mining projects. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements.
PRELIMINARY FOURTH QUARTER 2007 RESULTS
Unaudited Financial and Operational Highlights
(For table see attached file)
Preliminary Results Before Impairment Charges and Income Tax
This news release contains the preliminary unaudited results for Lundin Mining Corporation in respect of the three and twelve months ended December 31, 2007.
The summary financial information above is presented before impairment charges and income tax. Impairment assessments are under way by external advisers but are not yet completed. It is likely that there will be impairment adjustments in respect of goodwill arising from the merger with EuroZinc and the acquisition of Rio Narcea. Fair value assessments are also being conducted on assets acquired as part of the same transactions.
As soon as impairment assessments and any related income tax effects are finalized, the Company will make public this information.
Unaudited Results
The results contained in this release are unaudited and subject to change as a result of any adjustments that may arise as a result of the audit process. These results are stated before impairment charges and income tax.
Significant Highlights
· Fourth quarter earnings in line with the previous corresponding period. The inclusion of production from Neves-Corvo (2 months in 2006) and Aguablanca (acquired in July 2007) mines for the first time was offset by lower zinc production from other mines and lower zinc prices.
· Earnings for the year before impairment charges and income tax increased 121% to $453.6 million following significant growth as a result of the merger with EuroZinc in October 2006 and the acquisition of Rio Narcea in July 2007.
· Significant increase in copper production with copper revenue representing greater than 50% of sales in 2007.
· Construction commenced on the Zinkgruvan Copper Project.
· Aljustrel mine achieved first zinc production in December 2007 in accordance with plan.
· Net cash stands at $35.1 million at year end. All development is presently being funded from internal cash flow.
Q4 2007 Operational Summary
· Production of contained copper increased 76.2% to 27,487 tonnes in the period. Production of contained zinc was 12.7% lower in the fourth quarter 2007 compared with the previous corresponding quarter and contained lead was 9.4% lower. These reductions arose from lower head grades at Zinkgruvan, lower recoveries at Galmoy and scheduled reductions at Storliden which is planned to close in 2008. Production of nickel metal contained in concentrate amounted to 1,690 tonnes. There was no nickel production prior to the acquisition of Aguablanca.
· Production of zinc concentrates from the Aljustrel mine started according to plan in December. Commercial production is expected to begin early in the second quarter. Ore is currently produced from the Moinho ore body. Production of ore from the richer Feitais ore body is expected to start during the second half of 2008.
Project Summary
· The Ozernoe Zinc Project in eastern Russia is undergoing a feasibility study where the main focus during the fourth quarter 2007 was the commencement of size throughput studies considering as a minimum a 6 million tonne per annum initial mill feed rate. Certain of the milestones contained within the mineral license are under negotiation. These milestones need to be extended and while there is no indication that such extensions will not be given, there is also no guarantee that these extensions will be granted.
· At the Tenke Fungurume Copper Project in DRC, concrete installation started during the fourth quarter 2007. Lundin Mining’s partner Freeport McMoRan Copper and Gold Inc. (“Freeport McMoRan”) announced updated capital costs with the latest estimated direct capital cost rising to $900 million. First copper production is now expected in 2009. On February 19, 2008 the Company received a copy of a letter from the Ministry of Mines, Government of the Democratic Republic of Congo pertaining to the review of mining contracts in the country. The letter was addressed to Tenke Fungurume Mining S.A.R.L. the entity which is developing the mine and in which the Company has an equity investment of 24.75%. An appropriate response has been made to the Ministry of Mines.
· Study commenced on the Lombador Zinc Project. If approved, this will significantly increase the Company’s zinc production.
Restatement of financial statements
The Company has been informed by its tax advisors that a lower tax rate than allowed had been used in Portugal resulting in an under declaration of past tax contributions. The Company has restated and refiled its financial statements for each of the interim periods in 2007 and will be reflecting the effect on the 2006 annual financial statements in the comparative information when the Company presents its financial statements for the year ended December 31, 2007.
The restatement primarily affected the original allocation of the purchase price for the acquisition of EuroZinc Mining Corporation, the tax rate applied to the Portuguese operations since the date of their acquisition and the reversal of a future income tax benefit recorded in the third quarter. The effect on the earnings of the Company for the year ended December 31, 2006 is not significant.
A summary of the effect of the changes on previously reported net earnings of the Company is as follows:
(For tables see attached file)
Outlook
· 2008 production is expected to be 92,000 tonnes of contained copper, 202,000 tonnes of contained zinc, 6,800 tonnes of contained nickel and 47,000 tonnes of contained lead.
· Growth in Asian metal demand is expected to balance softness in North America and Europe. The price of copper is expected to remain at or above current levels with some weakness expected in zinc, lead and nickel.
· Treatment charges for copper concentrates are expected to fall. Treatment charges for zinc concentrates are expected to increase in favour of the smelters.
· Development continues in respect of the Tenke Fungurume Copper Project in the DRC and the Zinkgruvan Copper Project. Feasibility studies continue with respect to the Neves-Corvo Lombador Zinc Project and Ozernoe Zinc Project.
· Capital expenditures are expected to be $350 million to $400 million in 2008. Exploration is expected to remain near or slightly above 2007 levels.
· A review is underway involving all of the Company’s operations and projects with a view to active management and improvement.
(For full report see attached file.)
